The gross domestic product grew 6.1 percent year-on-year in the third quarter, slower than 6.2 percent in the second quarter and 7.2 percent a year ago, dragged down by a slump in farm output and sluggish household consumption amid high consumer prices.
The Philippine Statistics Authority said the 0.4-percent contraction in the agriculture sector offset the 6.9-percent expansion of services and 6.2-percent growth of industrial output.
“These third-quarter numbers confirm our earlier hypothesis about the weakness of our agricultural sector that was not helped by having a highly regulated trading regime, let alone expected weather disturbances,” Economic Planning Secretary Ernesto Pernia said in a news briefing.
The third-quarter GDP expansion brought the average growth in the first nine months to 6.3 percent, below the interagency Development Budget Coordination Committee’s revised target range of 6.5 percent to 6.9 percent for the year.
Net primary income grew 5.6 percent in the third quarter, resulting in the 6-percent expansion of gross national income,
Pernia said despite the 6.1-percent growth, the Philippine economy remained one of the fastest-growing in Asia, next to Vietnam at 7 percent, China at 6.5 percent and ahead of Indonesia at 5.2 percent.
“We are concerned about the third-quarter growth numbers, not because it fell below expectations, which stood at 6.3 percent. We are concerned about this slowdown, not because it makes the DBCC growth target for the year much more challenging. Rather, we are concerned, because the reason for the slowdown, among others, is the slowdown in household consumption, particularly the marked slowdown in the household spending on food and other basic products,” Pernia said.
He said with the latest numbers, the Philippines should expand by at least 7 percent in the fourth quarter to attain the low-end of the government’s target range of 6.5 percent to 6.9 percent growth for the whole of 2018.
Pernia said the 5.2-percent expansion in household consumption in the third quarter was the slowest since the 5-percent rise in the third quarter of 2014.
“And that is exactly why the government has swiftly moved to boost consumer confidence and tame inflation. With the measures we have been pushing for, the slowdown in household spending is deemed to be abatable and temporary. But we can only do so much. We need the support of many stakeholders here, especially the legislature and the media,” Pernia said.
He said the faster inflation rate, which hit a nine-year high 6.7 percent in September, caused the slowdown in household spending. Inflation in the first nine months averaged 5 percent, above the target range of 2 percent to 4 percent.
“If not for faster inflation rate, GDP growth could have been between 6.5 percent and 7 percent,” Pernia said.
Pernia said the 0.4-percent decline in agriculture was due to the decline in the production of corn (-14.4 percent), palay (-5.4 percent), fishing (-1.1 percent), and cassava (-3.1 percent).
He said the lackluster performance of the agriculture sector could be traced to the several typhoons that dumped excessive rainfall and delayed the planting decisions of the farmers.
Pernia expressed optimism that there could be a strong rebound in economic growth in the fourth quarter when consumption spending usually picked up during the holiday season in the past.
Pernia urged the Congress to pass without delay the Rice Tariffication Bill, which would reduce rice prices by P2 to P7 pesos per kilo.
“We will continue to be vigilant of downside risks to growth as trade tensions mount and debt markets become tighter. Thus, we need to put into action the Philippine Export Development Plan 2018-2022, which aims to boost exports and increase competitiveness of the industry,” Pernia said.
ING Bank Manila senior economist Nicholas Mapa said the disappointing growth print might “give some ammunition for the doves to call for a pause [in interest rate hike] at next week’s Nov. 15 Monetary Board meeting.”
“The 150 bp [basis point] cumulative rate hike for the year is likely weighing down on consumption and will dampen investment going forward. Holding off on an additional rate hike, as marginal as it may be, would give the Philippine economy the breathing room it needs to catch its breath and resume its above 6-percent growth trajectory in the fourth quarter with the mid-term election in sights,” Mapa said.